Incentivize Your Physicians to Save on the Cheap
There has been a lot written about “Pay for Performance” (PFP) programs to incentivize your physicians to save, but very little has been written about how successful it can be while spending very little money.
That’s what I’m hearing from the marketplace; it doesn’t take a lot of money to incentivize your doctors to save. All you need to do is to find out what products, equipment, training, technology, staff, etc., that they desire to do their work more effectively and productively, but don’t have these resources now. Then offer to purchase or obtain one or more of these “wish lists” items as an inducement for them to save money for your hospital, system or IDN on a particular initiative that you are proposing, such as, orthopedics, neurosurgery, cardiology, etc.
The operative words here are that these incentives must effectively and productively improve your hospitals operations. You don’t want to give away incentives that are just NICE to have but are not required. They must actually be beneficial to your hospital and your physicians to be a win-win scenario for all involved parties.
Naturally, these “Pay for Performance” programs can’t be arbitrary, ill-defined or unverifiable. To the contrary, they must be highly organized, truthfully measured and value-based. For example, you might find that your cardiologists have been requesting a new piece of equipment in their capital budget valued at $28,396, but it has been denied for years. Your task then is to have your cardiologist agree — in writing — that they will be required to save three times ($85,188) the value of this equipment by assisting you in the evaluation of your hospital’s pacemakers and difibrillator’s cost, product mix, and applicability for this new equipment to be approved for purchase.
Considering you would have a minimum return-on-investment for your hospital of 200% for this hypothetical project, I believe that this is what I would call “savings on the cheap” when you consider doing nothing is costing your hospital hundreds of thousands of dollars a year in lost opportunity costs.
So don’t be apprehensive about incentivizing your physicians to save (it’s a good business practice), since it is one of the best investments you can make with your hospital’s money. Keep in mind, your physicians have no incentive to save money today — unless you give them the incentive to do so!
Rethinking Your Supply Chain
Savings Beyond Price -Weekly eNewsletter – April 29, 2009
Robert T. Yokl
President & Chief Value Strategist
Rethinking Your Supply Chain
Greetings,
“Companies (and healthcare organizations) are searching for the right combination of smart cost cuts, strategic investments to get them through the current recession and position them to succeed when the economy rebounds. The question everyone is asking: What will be the new normal?” This is the reaction of Jean V. Murphy, a writer for Supply Chain Brain, to the realities of our new economy.
If there was ever a time to rethink your supply chain strategies this is it. No longer can it just be about price which only represents 1%, 2% or 3% savings for your healthcare organization annually. If your hospital, system or IDN wants to remain viable in this new economy, they and you will need to ATTACK all of your supply chain cost – all at the same time.
Because the NEW NORMAL, as Murphy calls it, will still mean reduced demand for your healthcare organizations’ services for many, many years, even if President Obama passes his national healthcare in this congressional session. Nothing happens quickly in Washington!
The only way for your healthcare organization to survive in these turbulent times is for them to doggedly manage and control their fixed and viable costs. Since your supply chain expenses are the second largest viable expenditure for your hospital, system or IDN this is YOUR responsibility.
Case in Point! We are working with a large healthcare system that is speeding up their plans to ratchet down ALL of their supply chain cost (price, utilization, inventory, physician preference items, contracts and logistics) at a breathtaking pace now that they realize what the impact of the NEW NORMAL means to their system. No longer is their corporate office accepting weak excuses from their hospital divisions on why the timing isn’t right for these initiatives, because they recognize that cost is our enemy and we must always be on the attack.
Is this the mind-set you too have with your supply chain cost? If not, why not, since your healthcare organization’s survival depends on it!
Your Partner In Savings Beyond Price™,
Robert T Yokl
Chief Value Strategist
Strategic Value Analysis® In Healthcare
1-800-220-4274
P.S. If you are interested in moving beyond price savings alone you might want to revisit my White Paper, “Building a Savings Factory” to get your saving machine humming again.
What’s Ahead for Supply Chain Management?
I often tell my CVAL course students that I read (and they should too) more industrial supply chain management periodicals than I do healthcare because I’m always looking for new, different and emerging best practices that I can share with my readers and clients. By the way, almost ALL new healthcare supply chain innovations come from other industries.
With this said, here’s three new industry ideas that will show you what’s ahead for healthcare supply chain management in the very near future:
1. Electronic Payments
Industry is way ahead of healthcare when it comes to paying their vendors electronically with no paper work involved. It generates bigger discounts for customers who agree to make faster payments to their vendors electronically. Everyone wins with this scenario!
2. Lifecycle Management (LM)
LM is all about scientifically managing of your products, services and technologies from birth to death (i.e. design, use, operate, maintain, support, sustain, phase-out, retire, recycle or disposal) to ensure maximum return-on-investment for any and all organizations. It’s just common sense to do so!
3. Demand Management
Demand management, or utilization management as we call it, is a supply chain operational area that we too have been focusing on for eight years. Its focus is on reducing the in-use cost of the products, services and technologies that any organization is buying by identifying waste and inefficiency in value streams, then eliminating them to realize better bottom line savings.
These are just three new industrial supply chain ideas that healthcare organizations can and should adopt to further enhance their supply chain management activities. They are tried, true and safe and have been proven to be best practices for industry for years. That’s what’s ahead for the healthcare supply chain of the future when and if you are ready to move to the next level of supply chain performance.
